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IT Funding Strategies

IT Funding Strategies. CPIS 210 – John Beckett. What Business Is IT In?. Examples: Server capacity, bandwidth Is IT in the business of buying lots of something and parceling out the cost? Upside: Save money due to economy of scale

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IT Funding Strategies

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  1. IT Funding Strategies CPIS 210 – John Beckett

  2. What Business Is IT In? • Examples: Server capacity, bandwidth • Is IT in the business of buying lots of something and parceling out the cost? • Upside: Save money due to economy of scale • Downside: The connection between expenditure decisions and company goals may not be well-understood at lower levels • Is IT in the business of buying something and providing it to others “free” because “it’s our job?” • Upside: IT is used, hopefully for good • Downside: If it doesn’t “cost”, there is no accountability • What about changes in the need over time? • This is a driver for “cloud-based computing.”

  3. Two Types of Money • Capital (five+ years, subject to depreciation) • Expense (one year, affects boss’s bonus directly) • Accountants’ Perspective: These are different kinds of money • In actuality they are different ways to account for money • You might gently remind them that either way reduces the bank account by the same amount • Guess where IT equipment lies… • Not neatly in either category • I have recycled equipment that was being depreciated as capital

  4. Purchasing Terms • Vendor – Someone you buy something from • OEM – “Original Equipment Manufacturer” • Theoretically refers to somebody who creates a new product from existing products • Sometimes used by vendors to indicate that you are on a higher tier • Lower prices • Better service(?) • Purchase Order • Invoice – required • Packing Slip – usually does not include prices

  5. Purchasing Steps Purchase • Definition of project • Request For Proposal • Specification from buyer, for vendors to consider • Proposal • Bids from vendors • Read to make sure they have complied with RFP • Purchase Order • From buyer to specific vendor • Acceptance • Now we have a legal contract • Delivery • Often by common carrier (UPS, Fedex, etc.) • Invoice • Demand from vendor to buyer for payment • Statement • Indicates status of outstanding invoices Defective product • Obtain Return Material Authorization from vendor • Ship with RMA on label • Cross-ship? Involves invoice for replacement • Verify that credit was applied

  6. Accounting Documents

  7. Financial Reports June 30, 2012 July 1, 2011 Balance Sheet Balance Sheet Income/Expense For the Fiscal Year 2011-2012

  8. Budget Cycle • The most critical form of communication between you and those above you • Is this a Project or an ongoing Budget? • Projects close, budgets may not • Varies widely by organization • Your boss’s participation varies widely • Keep an archive of all documents involved • Request • Tie to needs/projects • Approval • Note adjustments they make carefully • Spending • Purchase (see previous slide) • Employees • Accounting • Track expenditures on a spreadsheet • For columns, see “Documents” slide • Add one or more columns for “appears on docs from Accounting” • Compare plan to accomplishments • Document what has happened • Success isn’t “going under-budget”, it is “being on-budget”

  9. Questions to Ask • What happens to unused expense funds? • What happens to unused capital funds? • Is software depreciated? • What depreciation options do we have? • What is the authorization process

  10. Make Versus Buy Make Buy • Cost may be lower because you don’t waste money on functions you don’t need.

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